U.K. mortgage approvals rose in March, defying predictions of a drop as a tax break for first-time home buyers expired.
Lenders granted 49,860 loans to buy homes, compared with 49,029 in February, the Bank of England said today in London. Economists forecast 48,000, based on the median of 21 estimates in Bloomberg survey.
The property market received a boost in January as first- time buyers took advantage of a tax exemption on purchases of homes costing less than 250,000 pounds ($405,000) before it ended March 24. Approvals in February fell to the lowest since mid 2011.
“The numbers are a bit firmer than we expected, though there’s a risk they’ll continue to soften after the stamp-duty holiday expired,” said David Page, an economist at Lloyds TSB Bank in London. “We’re looking for the market to be relatively flat going into the end of the year.”
A separate report today showed U.K. construction growth slowed less than economists forecast in April. A gauge of building activity based on a survey fell to 55.8 from 56.7 in March, Markit Economics and the Chartered Institute of Purchasing and Supply said in a report in London. The median forecast in a Bloomberg News survey of 11 economists was for a reading of 54. A result above 50 indicates expansion.
The pound rose against the dollar after the reports and was trading at $1.6223 as of 9:52 a.m. in London, little changed on the day.
Surveys shows the property market is struggling to gain traction as banks limit lending and consumers are squeezed by rising energy prices. Confidence may be further undermined after figures last week showed the economy in its first double-dip recession since the 1970s.
Bank of England Governor Mervyn King will deliver a radio address from London later today, a week before officials meet to decide whether to extend their stimulus program known as quantitative easing.
Net mortgage lending rose 966 million pounds in March, while consumer credit increased 419 million pounds, the central bank said. Credit-card lending rose 203 million pounds.
The Bank of England will announce its next policy decision on May 10 against a backdrop of deepening troubles in the euro region, the largest market for U.K. exports. Spain this week joined Britain, Italy, the Netherlands and Ireland in recession as efforts to tackle unprecedented debt burdens sap demand.
The Monetary Policy Committee will have new growth and inflation forecasts. They’ll also have completed their latest 50 billion-pound round of asset purchases. Officials held their stimulus target at 325 billion pounds last month and kept the benchmark interest rate at a record low of 0.5 percent.
The decision may be complicated by figures today showing the measure of M4 money supply the bank uses to assess the effectiveness of its asset purchases rose at the fastest pace since the fourth quarter of 2007.
The gauge rose 6.4 percent in the three months through March on an annualized basis from 1.3 percent in the period through February, the central bank said. It excludes financial companies that specialize in intermediating between banks, such as holding companies and non-bank credit grantors.
Total M4 fell 0.8 percent in March from February and was down 5 percent from a year earlier.
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